History of United States Health Care System

Subject: Healthcare Research
Pages: 7
Words: 1985
Reading time:
8 min
Study level: College


The report discusses the history of the U.S. healthcare system; it presents the most significant political, legal, and regulatory factors that have contributed to the current U.S. healthcare system state. Additionally, the paper compares the differences in spending patterns based on GDP and infant mortality as metrics between the U.S. and China. The reimbursement trends in the U.S. are presented from a historical perspective. Finally, the paper explains how the Affordable Care Act impacted hospitals and their decision-making and operational planning.

The Most Significant Factors

Notably, the healthcare system in the United States has a long history and has undergone several adjustments throughout the years. Three factors that impacted the U.S. healthcare system through the years are the basis for health insurance in 1961, the introduction of Medicare and Medicaid in 1965, and the approval of the ACA in 2010. Cormack and Brown (2021) state that the primary government health programs in the United States, namely Medicare and Medicaid, provide critical health insurance for older and lower-income Americans. President John F. Kennedy formed the basis for senior health insurance in 1961, and President Lyndon B. Johnson signed legislation establishing the Medicare system in 1965 (Health Markets, n.d.). Thus, President Johnson signed Medicare and Medicaid into law in 1965, making the federal government directly involved in the U.S. healthcare system for the first time (Lavanty, 2018). Consequently, people under sixty-five who are incapacitated and have end-stage renal illness became eligible for Medicare coverage in 1972 (Health Markets, n.d.). Healthcare policy choices were influenced by the composition of Congress and the presidency and the political environment among the American population.

One of the most crucial changes in healthcare history is the introduction of the Patient Protection and Affordable Care Act (ACA). Zhao et al. (2020) argue that the ACA is the most significant reform to the United States healthcare system since the founding of the Medicare and Medicaid programs. President Barack Obama revolutionized American healthcare history in 2010 when he signed the ACA, which included protections for people with pre-existing diseases and the ability for children up to the age of twenty-five to be covered under a parent’s insurance (Health Markets, n.d.). The ACA’s core aims are to increase health insurance coverage, quality of treatment, and patient outcomes (Zhao et al., 2020). Moreover, the Act focused on maintaining or reducing costs through accelerating changes in the healthcare delivery system.

The ACA has considerably decreased the number of uninsured people in the United States. Historically, children aged eighteen or younger were either protected through the Children’s Health Insurance Program or were able to be covered under their patients’ private medical insurance (Zhao et al., 2020). Young adults essentially lost both eligibilities when they reached the age of nineteen. Additionally, the principal focus of private health insurance coverage was via college or employment, which was subject to frequent transformation and was not always accessible and affordable (Zhao et al., 2020). Before the ACA, young adults had the highest rate of uninsured people in the United States.

Spending Patterns of the United States and China

The current differences in spending patterns will be analyzed between the United States and China. A country that has developed industries is referred to as industrialized; in 2022, China is regarded as a newly industrialized country (World Population Review, 2022). Yang (2021) claims that in 2019, the United States spent the highest proportion of its GDP on health care among OECD member nations. The United States spent 16.77 percent of its GDP on health care, while China spent 5.35 percent (Yang, 2021). Compared to China, the United States had much larger private and governmental health spending. Inpatient and outpatient care spending accounted for most of the disparity between the United States and other nations (America’s Health Ranking, 2021). Nonetheless, a larger GDP percentage spent on health care does not imply a better-operating health system. Yang (2021) demonstrates that in the case of the United States, increasing expenditure is primarily attributable to higher expenses and prices rather than higher usage. For instance, physician pay in the United States is significantly greater than in other comparable nations. Additionally, pharmaceutical expenditure per capita in the United States is likewise much greater.

Despite spending much more on healthcare, the United States has poorer health outcomes. Kurani and Cox (2020) acknowledge that much of the national discussion has centered on retail prescription medication expenditure and administrative costs as the key drivers of healthcare spending in the United States. The majority of the extra money spent on health care in the United States goes to providers of inpatient and outpatient treatment (Kurani & Cox, 2020). The United States also spends more on administrative expenditures and far less on long-term care.

The infant mortality rate can be used as a metric for comparison. Feldstein (2012) notes Victor Fuchs’ definitive explanation of causes of mortality by age as a contribution of expanded medical services to increased health. Fuchs, for instance, investigated the role of living conditions, lifestyle, and medical services in the reduction of newborn death rates. Since 1900, the mortality rate in the United States has dropped dramatically (Feldstein, 2012). According to the World Bank (2020), the infant mortality rate is the number of newborns that die before they reach the one-year age for every 1,000 live births in a given year. In 2020, the infant mortality rate in the U.S. was 5.40, while in China was 5.50 (The World Bank, 2020). When considering states, Massachusetts and New Hampshire had the lowest infant mortality rates, both at 3.9 deaths per one thousand live births in 2019 (America’s Health Ranking, 2021). Moreover, Mississippi had the highest infant mortality rate, with 8.6 deaths per 1,000 live births.

Primary payers responsible for the payment of health care services bear the primary obligation for paying a claim. Based on the Center for Medicare & Medicaid Services (n.d.), Medicare continues to be the principal payer for users who do not have other kinds of health insurance or coverage. In other cases, Medicare is also the principal payer if specific requirements are satisfied. Sanjula (2021) states that historically, the Centers for Medicare & Medicaid Services (CMS) has been the single largest payer that has been responsible for healthcare services in the United States. Nearly ninety million Americans rely on Medicare, Medicaid, and the State Children’s Health Insurance Program for healthcare coverage (Sanjula, 2021). CMS is in charge of these three primary programs.

Medicare reimbursement trends in several disciplines have decreased during the previous two decades. Asahi et al. (2022) claim that the Centers for Medicare and Medicaid Services published its final physician fee schedule for 2021 on December 1, 2020; despite protests from the American Academy of Ophthalmology, ophthalmology compensation was reduced by 6%. Between 2000 and 2020, the average adjusted reimbursement ” by 25.4% (95% CI, -18.19% to -32.52%) with an average decrease of 1.30% per year (95% CI, -0.86 to -1.75) and CAGR of -1.61% (95% CI, -1.08% to -2.13%)” (Asahi et al., 2022, p. 326). Significantly, Given the expected expansion in Medicare utilization over the next decade and the future trend in general expenditures associated with delivering patient care, the decreasing reimbursement trend is alarming and threatens the long-term profitability of treatment. Asahi et al. (2022) suggest that disposable equipment used in V.R. operations, both in the clinic and in the operating room, can be expensive, contributing to the rising expense of V.R. procedures. The cost of conducting these treatments is projected to rise as technology progresses.

Current policy reforms and payer policy changes may significantly influence providers’ functioning and bottom lines. According to Ensemble Health Partners (2021), one of the significant trends is payers becoming providers. The distinction between payer and provider is becoming increasingly hazy as payers expand their presence in general care, post-acute treatment, telehealth, mental well-being, pharmacy, and other care delivery settings. Another trend in reimbursement is increased investment in mergers and acquisitions and payment integrity technologies. By 2025, payer spending on fraud prevention and payment integrity solutions is expected to climb by thirty percent. (Ensemble Health Partners, 2021). Payers are focused on acquiring and developing in-house techniques to decrease the almost $170 billion spent on incorrect claims and payments each year (Ensemble Health Partners, 2021). These trends will continue to impact and modify the healthcare field in the United States.

Health Care Reform Initiatives

The Affordable Care Act (ACA) ‘s reform initiative significantly impacted hospitals. Blumenthal and Abrams (2020) state that the reform initiated potentially game-changing changes in how health care in the United States is paid for and provided. The ACA reduced yearly growth in payments to hospitals under the regular Medicare program and payments to Medicare Advantage plans (Blumenthal & Abrams, 2020). Because of these arrangements, Medicare expenditure growth has been twenty percent lower than expected since the law’s passage.

By lowering the proportion of the uninsured population, the ACA’s insurance reforms were projected to have significant and beneficial ramifications for hospital finances. Young et al. (2019) emphasize that fewer uninsured people should mean less need for charity treatment and less bad debt for hospitals. According to recent research, hospitals in expansion states saw significant reductions in their uncompensated care expenses, including hospital charges for charity treatment and bad debt (Young et al., 2019). These decreases in uncompensated care expenses have contributed to a widespread belief in at least some policy circles that the ACA has positively influenced hospital finances.

Simultaneously, as the volume of Medicaid patients grew in expansion states, so did payment shortages for hospitals, which negated some of the savings hospitals realized from lower uncompensated care expenses. The fact that hospitals in expansion states indicated bigger payment gaps due to the ACA demonstrates that many hospitals are encountering lower Medicaid payments relative to expenditures than in the past (Young et al., 2019). According to Young et al. (2019), future Medicaid payment reductions, namely the expected decreases in disproportionate share payments, will disproportionately harm hospitals in expansion states.

A reform initiative impacted the operational planning and decision-making of hospitals. The ACA contains several Medicare-related payments decreases and hospital payment changes (Young, 2017). As a result of changes in Medicare policy and decreasing rates of uncompensated care, the operating environment for hospitals has altered dramatically. Young (2017) states that the payment reforms include initiatives that connect hospital payments to quality and efficiency criteria in terms of decision-making. The Act mandates tax-exempt hospitals to conduct a community health needs assessments (CHNAs) and present an action plan every three years (Young, 2017). Since the enactment of the ACA, the number of hospitals engaged in mergers and acquisitions on a national basis has surpassed one hundred each year (Young, 2017). By permitting hospitals to integrate vertically into other healthcare companies, the ACA encourages deeper industry consolidation.


The establishment of health insurance in 1961, the introduction of Medicare and Medicaid in 1965, and the approval of the ACA in 2010 influenced the United States healthcare system. The United States spent 16.77 percent of its GDP on health care, whereas China spent 5.35 percent of its GDP on health care (Yang, 2021). Compared to China, the United States had far more private and public health spending. Rapidly rising spending in the United States is primarily due to greater expenditures and prices rather than increased utilization. The infant mortality rate in China and the United States is nearly the same.

Current policy reforms and payer policy changes have a substantial impact on providers’ operating and bottom lines. Payers are becoming providers, and more significant investments in mergers and acquisitions and payment integrity technology are prominent reimbursement trends. The Affordable Care Act (ACA) has substantially affected hospitals. The ACA linked hospital funding to quality and efficiency requirements in decision-making. Furthermore, the ACA pushes broader market consolidation by allowing hospitals to incorporate vertically with other healthcare corporations. The operational environment for hospitals has evolved drastically as a result of the ACA.


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